Sounds to me like the so-called plan simply means you pay down your HELOC with any funds you can whenever they're available, and you draw funds from the HELOC to pay your bills near their deadlines. What's the big deal? That's standard practice if you owe money and have a revolving line of credit you can draw on easily. No reason for that payment to be only your paycheck.

Good luck in having your paycheck "deposited" into your HELOC, by the way. Most HELOCs don't work as checking accounts--you can't use a check with you as the payee for your payment, even if you endorse it over to the HELOC bank. (That's my experience with my HELOC--YMMV.)

nl1720 said:OP, can you give a link to the article?

http://seattlepi.nwsource.com/money/291092_real04.html

CycloneFW said:I just read an article about a HELOC payment program that us at FW can implement manually to save on interest charges.

It is similar to the idea of doing a 0% (or low APR) BT from a CC to the HELOC, and then taking the money back out of the HELOC for payments and return of principal before the rate expires.

The article was about a specific program (with an annual fee), but we can implement it ourselves with little trouble. Basically, you deposit all you payroll and other funds into the HELOC. Then, as you pay bills, you keep drawing off the HELOC. If you are set up like me, you can have the Ck acct linked directly to the HELOC and the bank will sweep funds to the ck acct as needed.

Basically, the article spells it out like this. If you pay $2k/month on your HELOC from a $5k monthy paycheck, even if you spend the other $3k, you will have a lower average balance over the month and thus save some interest.

I thought this was a pretty decent idea that some FatWalleters may want to implement themselves.

No where does it state that it is 0% APR. It only says that you have the option of making interest only payments for a set initial period (10 years). I am sure FWers are going to jump on that . It is all about increased liquidity (since pretty much your entire mortgage amount is like a line of credit) but these programs typically carry a higher APR than a conventional 30 year fixed mortgage. This type of "flexible mortgage" programs has been in the news in the past.

cameron2003 said:I think this is similar to the mortgage payoff plan where you take advantage of the daily compounding in a HELOC vs the monthly compounding in a mortgage. I think the idea is to use your HELOC for both outflow and inflow as much as possible. The advantage is that by depositing into it the average daily balance is reduced each month so that your total interest due is less. There are threads and websites about this. As I recall its big in Australia. I may not be explaining it exactly right, maybe this will jog someones memory.
For all the potential benefits of monthly compounding vs daily compounding etc. (I dont know for sure if it is even true), the two main downsides for these kind of mortgages/HELOC is that: (a) it is a variable interest rate product and (b) the APR generally tends to be higher compared to traditional fixed rate mortgages. For example, the article uses 7.75% as an example interest rate. That is almost a percentage higher than a 30 yr. fixed mortgage. The only selling point I see is the liquidity and that probably appeals to a small set of people.

cameron2003 said:I think this is similar to the mortgage payoff plan where you take advantage of the daily compounding in a HELOC vs the monthly compounding in a mortgage. I think the idea is to use your HELOC for both outflow and inflow as much as possible. The advantage is that by depositing into it the average daily balance is reduced each month so that your total interest due is less. There are threads and websites about this. As I recall its big in Australia. I may not be explaining it exactly right, maybe this will jog someones memory.

Precisely. Personnaly, I was not recommending that someone enroll in such a program. But with only a little bit of work, you can implement this concept without a big fuss. Also, some may have a HELOC like mine that provides a fixed rate option while continuing to allow access to the line. That is how I did my mortgage on my rental property, it is a HELOC with a fixed rate of 4.5%.